Today’s consumers are always looking for the best deals, and they have countless tools at their fingertips to find them. When it comes to financial institutions and their choice of credit and debit cards, rewards are among their top priorities.
According to a recent survey from CGI, 70 percent of respondents said rewards programs are important, noting that it was one of their top priorities in a financial institution. Fewer than 10 percent said they were unimportant.
Financial institutions that want to cater to the wants of their current and potential members should take note of this. Offering rewards through various services, particularly cards, is a great way to strengthen relationships.
Loyalty follows rewards
Consumers today like to be incredibly informed. With smartphone in hand, they conduct research before making any purchase or financial decision. According to PricewaterhouseCoopers’ Total Retail 2016, 36 percent of consumers use their smartphones to research products before buying, and the same amount compare prices using their mobile devices.
A similar trend may be seen when shopping for the right financial institution, and the results they find could seriously sway a member’s decision. According to ABA Banking Journal, 72 percent of consumers said they would think about switching financial institutions if they found out another one was offering better rewards than their current one.
Rewards encourage transactions
For a credit union or other financial institution or credit card provider, keeping their card as the top choice for their members is important. Rewards programs are one way to entice consumers to keep a particular card at the top of their wallet.
Payments Leader pointed out that between 2007 and 2013, cards without a rewards program saw the number of transactions per active account grow 11.87 percent, while cards with a rewards program increased 22.77 percent.
In that same time period, rewards cards grew 11.88 percent in terms of number of transactions and 11.35 percent in terms of the actual purchase volume of those transactions. Meanwhile, non-rewards cards increased 6.95 percent for number of transactions and 6.37 percent for purchase volume.
Setting themselves apart
Many institutions have found that rewards programs can be successful sales tools. In 2010, an amendment was added to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The amendment was called the Durbin Amendment, and it limited the amount of money big banks could make off of debit card transactions. With debit cards suddenly less profitable, many big banks canceled their debit rewards programs, leaving consumers with few of the options they had grown to love. However, the legislation only applied to those institutions that had more than $10 billion in assets, according to CreditCards.com.
Picking up where big banks left off, many credit unions and other smaller financial institutions began offering rewards debit programs to continue to serve consumers the way they prefer.
“A number of financial institutions went away from debit rewards because they felt it was costly,” explained Steve Silva, the vice president of marketing at Hanscom Federal Credit Union in Massachusetts, according to CreditCards.com. “We felt there was some value, and we return that back to the members.”
Hanscom’s reward program earns members one point for every $2 when they sign a receipt, or five points every time they use a PIN. Members can use the points in a variety of ways, but the most popular so far has been gift cards and digital downloads.
When working on increasing member engagement and satisfaction, it’s important to know what consumers want from their credit unions. Adding or improving upon a rewards program is one way a credit union can meet or exceed the expectations of their members.